With the current interest rate environment and the influx of baby boomers continuing to move into retirement, more people will benefit from a personal retirement gap analysis than ever, says Gregg DiGeronimo, President, for FirstMerit Financial Services, Inc.

Even those who don’t expect a gap between their income and their expenses in retirement can gain from such an analysis. “You will feel better knowing you have a plan in place and can see what options you have down the road,” DiGeronimo says. “We take into account considerations you might not have today, such as healthcare costs.

A retirement gap analysis investigates an individual’s expected retirement income streams, such as retirement accounts, required minimum distributions (RMDs) from any retirement accounts, Social Security, certificates of deposit (CDs), savings accounts, annuities and pensions. It also reviews what the individual expects to spend during retirement on such things as health care, housing, food, clothing, entertainment and travel.

A retirement gap is identified when a shortfall is predicted between income and expenses, DiGeronimo says. Knowing a gap is expected leads to the next step in the analysis—determining how to bridge that gap by looking at how big the difference is and identifying what steps can be taken on both the income and expense sides to lessen the gap if possible.

On the expense side, for example, DiGeronimo says he looks at the individual’s mortgage to see if its impact in retirement could be minimized with a short-term refinance or whether credit card debt can be consolidated and paid off timelier.

On the income side, DiGeronimo looks at what can be done with the individual’s investment portfolio to yield more money.

The analysis also takes into account the different stages of retirement – from the “go-go” years when a retired person normally spends the most money on things like trips to visit grandchildren and country club memberships, through the “slow-go” years in which their spending declines some because the person isn’t as active, and into the “no-go” years when personal expenses are virtually non-existent but health care costs typically increase, DiGeronimo says.

“I joke around and say most people spend more time planning their summer vacation than they do planning for retirement, but it’s true. You need to take a hard look at your financial plan annually to make sure you are in a comfortable position.”

“We can all benefit from a wide range of free retirement calculators that can be found online. Many of these types of calculators take a high level, broad look at how you are doing on your financial path to retirement. Most, if not all calculators, use a questionnaire that models your existing investments and estimates what they might yield over time” adds DiGeronimo.

DiGeronimo stresses that a retirement gap analysis with a financial advisor will be more comprehensive. “The financial advisor takes an in-depth look at income, expenses, cost of living and the goals of your retirement lifestyle and interprets that data to make recommendations that are personal to you. We will also take into account things like your risk tolerance and the stock market. People who do this analysis themselves most likely don’t have the financial background to make a recommendation for themselves.”

It is also never too early to begin this analysis, DiGeronimo says. Retirement planning should begin in an individual’s mid-20s or with his or her first job to avoid a future gap. “You don’t want to wait until you’re at retirement age to have this conversation,” he says.